M.I.T. RULED GUILTY IN ANTITRUST CASE

By ANTHONY DePALMA

Published: September 3, 1992

Correction Appended

A Federal judge ruled yesterday that the Massachusetts Institute of Technology had violated antitrust laws by participating in a decades-long conspiracy with other elite universities to fix the amount of student financial aid packages.

Louis C. Bechtle, Chief Judge of the Federal District Court for the Eastern District of Pennsylvania, clearly and pointedly rejected M.I.T.'s argument that it was engaged in charity, not conspiracy, when it shared confidential financial information on students with other universities.

In a ruling that punctured the prestige of some of America's most respected academic institutions, Judge Bechtle called the activities of the Overlap Group -- the name used by M.I.T. and the eight Ivy League colleges and universities -- "plainly anti-competitive." More Lawsuits May Follow

The ruling may open M.I.T. up to a flood of additional lawsuits by students and former students who felt they had been denied sufficient aid because of the agreements.

In May 1991, to avoid a trial, the eight Ivy League institutions signed a consent decree with the Government, agreeing to discontinue sharing information about prospective students to determine how much they and their families should pay for education. M.I.T. chose to fight the case in court.

In his ruling, Judge Bechtle wrote: "M.I.T.'s attempt to disassociate the Overlap process from the commercial aspects of higher education is pure sophistry. No reasonable person could conclude that the Ivy Overlap agreements did not suppress competition."

Charles M. Vest, the president of M.I.T., said in a telephone interview that he was surprised by the ruling and disappointed that Judge Bechtle had decided "not to consider in any depth the social and educational policy matters, but to look at the issue in the very narrow range of antitrust law."

Mr. Vest said M.I.T. would appeal the ruling. A Form of Discount

Charles A. James, Acting Assistant Attorney General in charge of the antitrust division of the Justice Department, which filed the civil lawsuit last year, said, "The principle that we were primarily interested in establishing in this case is that these financial aid awards are a form of discount from the price charged by these universities, and should be set by market forces."

Although the Overlap Group met for 32 years, a four-year statute of limitations in antitrust cases would probably limit the number of students who could sue for damages, lawyers said.

Phillip Areeda, Langdell Professor of Law at Harvard University who is one of the nation's foremost authorities on antitrust law, said students who had been denied financial aid by M.I.T. could seek treble damages based on the precedent set by yesterday's ruling. They would have to prove that they would have received more financial aid if not for the universities' conspiracy.

In all likelihood, a class-action suit would be filed because the costs are so high. But winning such a case would not be easy. On Estimating Damages

"The hardest thing to do would be to prove in dollars and cents terms what the Overlap arrangement meant to a particular student," Professor Areeda said. "Generalized schemes of estimating damages wouldn't work."

He said he did not think the other colleges and universities in the group -- the ones that signed the consent decree -- would be liable for damage suits based on yesterday's ruling. But Mr. James of the Justice Department said that "anyone who was injured by virtue of an antitrust violation anywhere is entitled to sue privately."

M.I.T. refused to sign the consent decree last year on the ground that the meetings were overt and designed not to restrict competition, but to enhance the universities' ability to spread their financial aid resources among a large number of students.

By taking the high ground and battling the Government, M.I.T. went through a costly -- more than $1 million, by its estimate -- and highly visible trial, partly broadcast on cable television, in which it sought to convince the court that the financial aid practices of select universities were not covered by the Sherman Antitrust Act, which is generally applied to corporate commercial activities.

In some ways, higher education itself was seen as being on trial. The unprecedented action by the Justice Department was viewed as an extreme example of a growing mistrust between government and the academic world, a mistrust also evident in Congressional hearings on research spending abuses and state cutbacks in higher education. Meetings Began in 1950's

The department was roundly criticized by academic leaders as pursuing a misguided goal by applying the antitrust laws for the first time to the noncommercial activities of universities.

The Overlap Group began meeting in the late 1950's. The Ivy League institutions -- Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, Yale and the University of Pennsylvania -- along with M.I.T. jointly agreed that they would not try to outbid each other for talented students.

In limiting their financial aid to meet the needs of the students and their families, the universities agreed on a special formula that differed from the standards devised by Congress and used by most other universities.

Each spring the group's officials met to share information and discuss the special cases of students who had been accepted by more than one member. If two or more universities found that their estimates of need did not agree, they negotiated a compromise figure, raising or lowering their offers to come up with a standard package.

That is the heart of the court's contention that the agreements did in fact limit competition and reduce a student's ability to get the most advantageous financial aid package.

In the 10-day trial, M.I.T. tried to show that it had not profited financially from the agreements. But Judge Bechtle limited his decision to a strict interpretation of antitrust law, saying profit was not the issue.

M.I.T. also relied heavily on convincing the court that the social benefits of the agreements far outweighed any technical legal violation. It offered as proof the fact that in the last academic year, 44 percent of its undergraduates were members of minorities and 57 percent of students received more than $20 million in financial aid. M.I.T. Arguments Rejected

Without such agreements, M.I.T. argued, needy students would inevitably suffer as the universities would be forced to compete for the best students.

The court rejected M.I.T.'s arguments. "If M.I.T. and the other Ivy League schools were to so easily abandon these objectives merely because Overlap was not in play, then the court could only conclude that their professed dedication to these ends was less than sincere."

Judge Bechtle's strict interpretation of the antitrust laws seems to be characteristic for a judge who, in 1982, held the State of Pennsylvania in contempt and withheld Federal highway funds until the state enacted an auto emissions inspection program.

In 1983 Judge Bechtle, a former United States Attorney who was named to the Federal bench by President Richard M. Nixon, presided over the consolidated trial of more than 1,250 cases from the MGM Grand Hotel and Casino fire in a surprising 18 months.

Robert Reinstein, dean of Temple University Law School, from which Judge Bechtle received his law degree, called Judge Bechtle "tough but fair."

Correction: September 9, 1992, Wednesday Headlines on Thursday about a Federal antitrust judgment against the Massachusetts Institute of Technology referred imprecisely to the judge's ruling. The case was civil, not criminal; thus there was no finding of guilt.